Money-laundering key to tackle terrorist threat

Cutting off terrorist funds is seen as important to curb the threat of violence. The US govern-ment now estimates that the 11 September attacks cost around $400,000- $500,000 to carry out, of which $300,000 passed through the hijackers’ US bank accounts.

Yet a report published by its investigative staff report last year admitted that “in reality, completely choking off the money to al-Qaeda and affiliated terrorist groups has been essentially impossible”.

Where governments have been able to make a difference is in tracking financing as a way to find would-be terrorists and have more chance of heading off a plan- ned threat.

From October 2007, EU rules on money laundering – aimed at sniffing out financial crime – will be extended to include terrorist financing.

Those covered by the rules, based on recommendations by the international standards-setter the Financial Action Task Force, will have to check and monitor their customer relationships and report any suspicions of money-laundering or terrorist-financing.

In 2001 the European Commission extended the rules, which have applied to financial institutions since the early 1990s, to lawyers, notaries, accountants, real estate agents and casinos. From 2007 they will also apply to those who provide company services trusts, and to life insur- ance brokers.

The EU executive is also planning to publish a code of conduct for the voluntary sector in early November, following claims in the US that some EU-based charities raised finances for the Palestinian militant organisation Hamas.

Not everyone is happy with the new measures. Lawyers in particular have opposed the new money-laundering rules, which they say impose an unnecessary burden on lawyers and undermine the confidential nature of their client relationships.

Jonathan Goldsmith, secretary-general of the Council of the Bars said that EU lawmakers had burdened lawyers without putting in place a system for eventual prosecutions to take place.

“We are passing more and more laws that undermine civil liberties that will not actually win the fight on terrorism,” he said. Goldsmith added that Europe was the only bloc to implement the task force recommendations on his profession.

In July Belgium referred to the European Court of Justice a case from the Belgian bars questioning the impact of lawyer-reporting and its breach of confidentiality on the Convention of Human Rights and the EC Treaties. Goldsmith is hoping this will further his cause.

Others point out the limitations of the rules, one of which is the small amount of money needed to carry out an attack. The Commission estimates that the Madrid bombings in March last year cost only €8,000.

A British banking expert said: “Another big problem is that a proportion of terrorist financing is raised through fraud. That makes it extremely difficult to detect whether the money is being spent on terrorist activity or being siphoned off into private pockets.”